We draw your attention to three recent cases which have been decided and which have impact on property matters.
The first case is Evenden Estates v Brighton and Hove City Council and another and in it the First-tier Tribunal considered whether a former public house has a realistic prospect of community use in the next five years. The background to this case concerns the Localism Act 2011 which introduced a right to bid for and buy local land that is considered to have community value known as an asset of community value (ACV). If the owner of land listed as an ACV wants to dispose of it, the community is given the opportunity to develop a bid and raise the capital to buy such land. This means that an owner of land listed as an ACV is restricted from disposing of its land until a certain period of time has passed.
Land of community value is defined in the Localism Act 2011 and includes land that has previously been used for the purposes of furthering the social well-being or interests of the local community in the recent past and where it is realistic to think that it will be used for the same purpose again within the next five years. In the case in question Evenden Estates owned the Rosehill Tavern. This tavern had been a public house prior to its closure as a result of its sale to Evenden Estates. Evenden Estates had applied for planning permission to change the use of the tavern to residential. The Rosehill Tavern Action Group a nominating body for the purposes of the Localism Act 2011 successfully applied to the local authority for the tavern to be placed on the list of ACV. This decision was then reviewed at the request of Evenden Estates, but the local authority decided to maintain the tavern on the list. Evenden Estates appealed to the First-tier Tribunal. It was argued by Evenden Estates that it was unrealistic to think that the tavern could have a community use within the next five years. The trading figures for the tavern over recent years had shown losses as was the case for many public houses even though the rent and wages had been very low. There was also no evidence that the Action Group had raised any of the £350,000 plus VAT required to purchase the tavern. The local authority argued that Evenden’s application for planning permission had not been determined, the future of the tavern was uncertain. They argued that it could not be said that the relevant community use in the next five years had to be unrealistic even if it might be. The First-tier Tribunal found that the test mentioned above for land of community value had been met and the tavern was an ACV. It stated that if planning permission should be refused for the change of use to residential, Evenden would probably look to do something else with the tavern. At that stage the property could be put on the market whether as a public house or for some other currently permitted use that would further social interest. It was stated that compared with letting the property stand idle those alternative possibilities could not be discounted as unrealistic. The FTT also considered some other points, namely:
- The tavern had a long history of use as a public house and the recent losses related to only a short period of such history.
- There were building developments in progress that would bring several hundred students into the area.
- An advisor to the Action Group had considerable experience working with those raising funds for community ventures.
- The chair of the Action Group had a background as a professional pub manager in both London and Brighton.
- It was reasonable at this stage that the Action Group had focussed their efforts on the application for planning permission rather than fund raising to purchase the property.
This is a decision which will be welcomed by community groups attempting to bring similar properties back into community use, it is only part of the battle against development of former public houses, as local authorities are not required to take ACV listing into consideration when looking at planning applications. It is currently open to each local authority to decide whether the listing as an ACV is a material consideration if an application for change of use is submitted considering all the circumstances of the case. In February of this year, the House of Commons Communities and Local Government Committee did recommend a change to existing guidance so that an ACV listing is a material consideration for local authorities in all planning applications other than those for minor works. This would have an effect on the impact of an ACV listing for proposed development.
The second case which we draw your attention to is RTA (Business Consultants) Limited v Bracewell. In this case the High Court applied the law on contracts prohibited by statute to decide whether an agent could enforce its contract against a customer. The circumstances of the case are that the Money Laundering Regulations 2007 create a criminal offence and a regulatory penalty for conducting an unregistered estate agency business with a defence for those who having taken due care did not know they had to register. The regulation provides that an unregistered estate agent may not carry on the business or profession in question. The High Court in this case concluded therefore that this provision prohibited an unregistered agent from making any contract to sell or buy business premises for a customer since that would be carrying on the business of estate agency. In this case therefore the agent’s contract with this customer was unenforceable so claims for unpaid fees and commission would not succeed. No one in the case suggested the agent had committed a crime or regulatory offence or behaved badly in any way, but the contract was prohibited by law and so could not create legal rights.
The final case we draw your attention to is that of Waaler v Hounslow LBC where the Upper Tribunal of the Lands Chamber considered a landlord’s ability to recover the cost of improvements under the Landlord and Tenant Act 1985. As you may be aware most tenants of residential properties benefit from protection against excessive service charges under the Landlord and Tenant Act 1985. For the purposes of such Act service charges are an amount which is payable by a tenant of a dwelling as part of or in addition to the rent and is payable directly or indirectly for services, repairs, maintenance, improvements, insurance of the landlord’s management costs and varies or may vary according to the relevant costs. The provisions are that the landlord may only include costs in the service charge to the extent that they are reasonable. There are two elements to the reasonableness test namely the costs must have been reasonably incurred and the works or services to which they relate must be of a reasonable standard. In this case the tenant owned a flat in purpose built block which formed part of an estate owned by the landlord council. In 2004 the landlord served a notice under the Landlord and Tenant Act 1985 that it intended to carry out major works to the block. The notice stated that the tenant’s share of the estimated charges would be £61,134.01. The works included replacing the flat roof of the block with a pitched roof and replacing the windows with new units because the hinges of the original windows were inadequate for the weight of the glass in the tilting windows. Replacing the window units necessitated replacement of the exterior cladding of the building and the removal of underlying asbestos. The works to the tenant’s block were completed in 2006. In 2012 the tenant received a demand for £55,195.95 and the tenant applied to the First-tier Tribunal for a determination of its liability to pay the costs. The First-tier Tribunal found the costs were substantially payable. The tenant was however given permission to appeal to the Upper Tribunal on four grounds including whether the landlord’s decision to replace the windows, thereby necessitating replacement of the cladding and the asbestos was reasonable. In the case the tenant’s appeal was successful on the ground relating to the replacement of the windows. The Upper Tribunal found that the First Tribunal was wrong to find that it was reasonable for the landlord to replace the windows with new units on the basis that:-
- Replacing the windows with new units amounted to improvement and not repair. The landlord had a discretion under the lease to carry out improvements and the tenant was required by the lease to contribute to the cost.
- Although the Landlord and Tenant Act 1985 made no express distinction between repairs and improvements, the approach when determining what was reasonable must be different. A landlord would usually be under an obligation to repair, whereas improvements may be simply a matter of choice.
- Where the cost of the works was high, and the result of those works was a building which was wholly different than the original building, the landlord must consider before proceeding with the improvement the availability of an alternative and less expensive remedy and the views and financial means of the tenants who would be required to pay for the works. The costs of the works to the windows and the replacement of the cladding was extremely high and the only disrepair of the windows was caused by the design of the tilting windows which were too heavy for their hinges. The design defect had existed and been managed for at least thirty years. In previous years when hinges had failed they had been replaced but it was no longer possible to obtain replacement hinges. There was no evidence that the landlord had considered replacing the heavy glass units in the tilting sections of the windows with lighter panes. The Upper Tribunal found therefore that the landlord had failed to explore alternative less expensive solutions before deciding to replace the whole unit. There was no evidence the landlord had considered the financial impact on the tenants of replacing both the window units and the cladding. This decision may be significant in potentially introducing a two tier approach that requires costs to be categorised as improvements or repairs. Some cases will be harder to distinguish than in this case which will create uncertainty for both landlords and tenants. The findings of the Upper Tribunal in this case will also increase the burden on landlords to show that they have considered alternative approaches and the financial impact on tenants of improvements before proceeding. Failure to do so may provide tenants with ammunition to challenge high service charge bills.
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